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Contributors
Chuck DeVore- Contributor
Assemblyman Chuck
DeVore represents 450,000 residents of Orange County
California’s
70th Assembly District.. He served as a Reagan White House
appointee in the Pentagon from 1986 to 1988 and was Senior
Assistant to Cong. Chris Cox. He is a lieutenant colonel in the Army
National Guard. Chuck’s novel, CHINA
ATTACKS, sells internationally and has been translated
into Chinese for sales in Taiwan. [go to DeVore index]
 A
Taxing View from the Golden State
How much is enough?…
[Chuck DeVore] 6/1/05
When it comes to state taxation and spending, how much is enough?
More importantly, how much is too much? California only grapples
with these questions when it has a Republican governor, otherwise
the debate among Democrats centers around how fast to increase
spending and taxes.
With capital gains
swelling tax receipts in the 1999-2000 budget year, California
collected an all-time high of revenue averaging
$3,111 from every person in the state (in inflation adjusted
2005 dollars). With these record collections, the majority party
set about to spend every nickel on new and existing government
programs. When the boom subsided, the state was left with a persistent “structural” deficit
of about $7 billion per year. The political consequence of this
profligate spending was the wave of voter disgust that swept
Governor Arnold Schwarzenegger into office in 2003.
With such a dramatic recent history, you would think Sacramento
lawmakers would have learned a thing or two. Instead, in the
2005-2006 budget year now being considered in Sacramento, we
will collect taxes at the second highest rate in our history
while spending will top more than $8.44 per $100 of personal
income.
What will all this tax money purchase? Health and welfare programs
alone will top $32 billion of state money, eating up almost a
third of the budget. Of course, those who lobby for the disadvantaged
say it is not enough.
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As with many other
states and the Federal government, health care costs in California
continue to mount, with cost drivers
including medical inflation, an aging population and a loss of
health insurance resulting from the loss of dot.com jobs. California’s
health care costs are also impacted by the almost two million
illegal immigrants whose 501,000 undocumented children use state
health programs at a 30 percent rate compared to only 18 percent
of the children of citizens. Lastly, during the heydays of the
late 1990s, the Legislature voted to greatly expand health and
welfare programs. These measures included: extending Medi-Cal
to cover all residents up to the Federal poverty limit, paying
family members greater wages to look after their disabled kin
(they are now unionized), and making children’s health
insurance available for families up to 250 percent of the poverty
level. This mammoth expansion of government added 1.2 million
new beneficiaries to Medi-Cal alone – making one out of
every 30 Californians a new client of the welfare state.
In response, Schwarzenegger
has proposed an overhaul of Medi-Cal, saving $332 million over
five years by moving people in the system
to HMOs and by charging more for doctor visits. Even though the
savings are modest when compared to the size of recent program
expansions, the governor’s plan is opposed by legislative
advocates of the welfare state who are now emboldened by Schwarzenegger’s
flagging poll numbers to renew their calls for tax increases.
The wisdom of the
governor and his Republican allies in the Legislature holding
firm on taxes last year has been borne out
by huge revenue gains this year (see chart). The increased revenue
came as the result of economic revival, not a higher tax burden – a
point that is entirely lost on the Democratic majority in Sacramento.
The liberal demand
for higher taxes comes at a perfect time politically. Schwarzenegger’s reform initiatives are likely
headed for a November 2005 special election. These reforms coupled
with the GOP’s no-new-taxes stance will offer Golden State
voters a sharp contrast with the tax and spend status quo crowd
that has dominated the statehouse for decades. CRO
copyright
2005 Chuck DeVore
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